Swaraaj India Newsletter- 19 DEC, 2014

SWARAAJ SHIPPING WEEKLY 19th DEC 2014The Coal Bids Repercussion: Poor Transmission Network Hurting PowerThe coal ministry on Thursday released the approach Companies:paper for coal auction and has charted out theeligibility criteria as well as the methodology and The power sector is unable to useformula for the auction. at least 10% of its capacity due to the choked transmission networkClick to read full story here in the country. Projects of Tata Power, Essar Power, Jindal Power,Actual Stock at Power plants with coal linkages (104) as on  JSW Energy, CLP, DB Power, MB Power, Emco Energy, GMR and 12/16/2014 (in '000 tonnes)  Adhunik Power are under influence.CAPACITY (MW)  114,548  Click to read the full story hereNORMATIVE STOCK REQ (DAYS)  21  Market trends & Freight MatrixDAILY REQUIREMENT IN '000 TONNES  1,506 IMPORTED QTY  1,579 INDIGENOUS QTY  10,914.10 TOTAL QTY  12,493.14 WILL LAST FOR DAYS  8 India Joins Iron Ore Output Surge: From our Supra Desk:India is all set to enter the iron ore market, dominated This week Vessels open ECI were inby Brazil, as another source of cheap ore. India’s steel demand from Indo-India biz causeministry announced that state-owned mining company of low bunker price and to keepNational Mineral Development Corp. (NMDC) will demurrage rate low, many Indianraise iron ore output to over 75 million tonnes per port are facing congestion and thusannum by the 2018 to 2019 financial year. The target this approach seems correct. Thefor 2020 to 2021 is more than 100 million tonnes per week started busy in the Indianyear. Ocean trade with enough cargoes coming out from PG and WCI.Click to read the full story here From our Pmax Desk: Market As predicted, the activity slowed Trends down and so have the rates. In and Atlantic, owners were running to Reported Fixtures deploy in order to cover their spot this week: vessels over Christmas and New Year. Iron ore shipments were seen Click to know getting active ex Goa – the long more awaited exporter state. Read full commentary here 1

Poor Transmission Network Hurting Power CompaniesThe power sector is unable to use at including Power Grid Corporation, Reliance least 10% of its capacity due to the Infra and Sterlite Grid with investments of choked transmission network in over 7,000 crore (USD 1.12 billion) are held the country. Projects of Tata up or delayed due to lack of official clearances.Power, Essar Power, Jindal Power transmission constraints have alsoPower, JSW Energy, CLP, DB Power, MB made it difficult to evacuate excess power andPower, Emco Energy, GMR and Adhunik channel it to regions that face shortages.Power are under influence. Projects have had to purchase power from As reported, inadequate transmission costlier sources while others remained under-has kept about 25,000 MW of generation utilized. Hence, there is an urgent need tocapacity idle, making the problem timely address underlying issues in thecomparable to the issue of acute fuel scarcity transmission sector to ensure power demandthat has hit about 30,000 MW of new is effectively met in the future.capacity. In addition to the inadequatecapacity, regulatory authorities impose strictrestrictions on the utilisation of existingnetworks and keep a large amount oftransmission capacity idle as a safeguardagainst grid collapse. Therefore, it is crucialto establish new transmission capacity onimmediate basis. It is heard that the newtransmission capacity in key corridors isscheduled to come up after 4 years, makingthe outlook grim for power plants. Even though the capacity of the power India is one of the few countries whereplant is utilized at its 100%, it stands useless Transmission Sector has been opened up foras there is no capacity available to distribute private participation & has also receivedthis power, sighting these power plants idle. significant interest from private players. Still,The impact of this transmission congestion the success of the sectors is yet to be achieved.has been increasing with time impacting the There is an urgent need to synchronise theprices. Ashok Khurana, director general of policy framework with a wider participationthe Association of Power Producers, says by inviting private players to achieve therestrictions on capacity utilisation of common objective of meeting power demandtransmission corridors often prevent and optimally utilizing generation capacity.generation companies from supplying powereven after signing long-term power supplyagreements. At least half a dozentransmission projects of various companies Back to home 2

The Coal Bids RepercussionThe coal ministry on Thursday released the approach paper for coal auction and has charted out the eligibility criteria as well as the methodology and formula for the auction. The model tender document is open for public consultation till December 22 and the plan is to complete the first phase of the allocation process by March 31, 2015. There are some issues that could be challenging following this e- auction following this methodology. There is the possibility that power plants that don’t have PPA’s will be able to bid lower price for coal, get the mine and then load on the extra costs back on the fixed costs. Considering this, power ministry may want to reconsider the cost and allow regulator to determine the tariffs after making an allowance for such issues. Moreover, if commercial miningis to be allowed, the government will have to free up prices which will have to be passed on toconsumers. Another and very important concern remain is whether using Coal India price is thecorrect thing to do? Coal India being the major coal player in the country, possess better minesand can pay for production at comparatively low cost. It may not be feasible for other firms tomine at the same cost.The government seems to be pushing in a lot of conditions. On account of all these changes, it maymean that projects which do not have PPAs or projects which are using imported coal may end uphaving a competitive advantage over other players. The approach paper navigates requirement ofpower generators, but does not clarify on few important indicators such as inflation impact,projects with partial PPAs, logistic impact, etc. These should be addressed in the bid provisions atpresent to avoid any future nuisance.Back to home 3

India Joins Iron Ore Output SurgeIndia is all set to enter the iron ore market, dominated by Brazil, as are being forced to source ore from the another source of cheap ore. India’s international markets—some for the first steel ministry announced that state- time in over a century—while others are shelving expansion plans. owned mining company National YEAR  STATE  ACTION Mineral Development Corp. (NMDC) willraise iron ore output to over 75 million The court allowed the resumption of tonnes per annum (mtpa) by the 2018 to2019 financial year. The target for 2020 to iron ore mining in Karnataka, but 2021 is more than 100 mtpa. 2013  Karnataka  with a cap of 30 mtpa. However,  Top producer Vale plans to boost many mines in the state are still shut Brazilian output to 450 mt by 2018 from 306million last year while Rio Tinto is well on its on the back of pending clearances. way to reach 360 mt in the next few years.BHP Billiton' is on target to grow capacity to The Supreme Court lifted the ban, 290 mtpa by mid-2017. The productionsurge is required to push the sub-continent's 2014  Goa  although it capped iron ore mining in steel production rate to a long term target of300 mt by 2025. That would require Goa at 20 mtpa. production of 500 mt of iron ore annually. 2014  Odisha  The court ordered closure of mines  The government closed 12 of its 17  2014  Jharkhand  iron ore producing mines as their  leases had expired.  Even though there have been some mine renewals in Goa, the second largest iron ore exporter in India, the state government wants to take it slow and decide only by March 2015 to clear the renewals.While the increased output is Odisha government, too, has decided not todesigned to boost India's domestic renew any iron ore mines for now. Thedevelopment, it may have knocked on effects cumulative impact of these decisions hason the export market. China already been that imports have dramatically risenconsumes more than two-thirds of the 1.2 while exports have plummeted.billion seaborne trades, a proportion that Even though the iron ore miningcontinues to rise. The price of iron ore, down issues are state government specific, like innearly 50% this year, slid to a fresh 2009 low Karnataka, Goa, Odisha and Jharkhand, theafter worries about Chinese demand added central government can still do a lot as allto already negative sentiment on the back of mines are governed by the Mines anda supply surge. Minerals Development and RegulationRegrettably, taking into consideration (MMDR) Act. The government intends tothe current state of affairs, India’s iron ore amend the MMDR Act to include provisionssector is still in the doldrums. This is a that would allow bidding for iron ore minesconsequence of the Supreme Court’s ban on and auctioning of the same and consideringmining iron ore. Other factors include current issues like deemed renewal. Tilluneven actions by a hold of state then, the fate of India’s iron ore sector—andgovernments as there is uncertainty in that of its steelmakers—lies in the hands ofrenewing mining leases. And the result is individual state governments.that some of India’s largest steel companies Back to home 4

Brokers CommentarySupramaxWeek remained tight on hire rate this week mainly due to year ending volumes on yearlycontracts. This week Vessels open ECI were in demand from Indo-India biz cause of lowbunker price and to keep demurrage rate low, many Indian port are facing congestion andthus this approach seems correct. Have seen a little lull in steel cargoes out of North Chinabut still few cargoes were there to take out excessive tonnage supply. Talking about TC rateswe heard a Tess52 open South China was fixed for Indo-ECI with coal at around USD 10,000Daily. Steel parcel within pacific were paying handsome amount of USD 9,000 Daily for shipsopening N China. Coal to China was paying around USD 9,000-9,500 Daily bss DOPSingapore. Supra were paid about USD 12,000 For ECI redel bss Singapore for coal trips andUSD 14,000 Daily for WCI redel.Overall everyone was looking forward to close the books for the year and preparingthemselves for coming year which is already looking gloomy. The week started busy in theIndian Ocean trade with enough cargoes coming out from PG and WCI. Also Inter PGaggregates helped to keep the market steady where vessels were fairly getting rated aroundUSD 10,500- 11,000 DOP. Also, salt and iron ore cargoes from WCI were rating vesselsaround USD 5,500 – 6,000 for trip to China. Heard vessels open in PG were rated aroundUSD 8,500 – 9,000 for trip to India. On the South African coal, vessels getting rated aroundUSD 8,750 + 150,000 GBB for India.PanamaxIn general, a week was quiet for both hemispheres. As predicted, the activity slowed down andso have the rates. In Atlantic, owners were running to deploy in order to cover their spotvessels over Christmas and New Year. Charterers use the competitive levels by bringingJanuary cargoes in the market this week. The few prompt Atlantic cargoes being fixed at verysharp levels. Short Baltic rounds covered in the low USD 9,000. Same goes for Front haulcargoes ex USG covered in the low USD 14,000 region. While S. America /feast grain paid tickless 12,500-13,000 range. Pacific rounds covered in the high 6,000 - low 7,000 ranges andsliding further. Almost no Period deals fixed as charterers expecting this to be cheapertomorrow.Rates in the East continued their downslide as there were more number of ships opencompared to lesser injection of cargoes. There were a considerable number of ships seenopening in India region as the imports of coal cargoes to India continued resulting in portcongestions and more ballasters towards Indonesia. Due to the downsizing of the cape rates,many owners were seen competing for smaller Pmx/Ppmx stems. Iron ore shipments wereseen getting active ex Goa – the long awaited exporter state. Some ships were reported fixed ataround USD 7,000/7,5oo per day levels from WCI to China. The average pac round voyageremained at USD 7,000 per day levels whereas trips to fetched some USD 500/1,000 more perday. Back to home 5

Baltic fixture trends**Baltic Exchange Bunker weekly trends395.00 Singapore ‐ IFO380 (RMG380 RMH380) in USD/MT382.00 PRICES369.00356.00343.00330.00 8‐Dec 9‐Dec 10‐Dec 11‐Dec 12‐Dec 13‐Dec 14‐Dec 15‐Dec 16‐Dec 17‐Dec 18‐Dec 19‐Dec www.bunkerworld.com614.00 Singapore ‐ MDO (DMB DMC) in USD/MT602.00 PRICES590.00578.00566.00554.00 8‐Dec 9‐Dec 10‐Dec 11‐Dec 12‐Dec 13‐Dec 14‐Dec 15‐Dec 16‐Dec 17‐Dec 18‐Dec 19‐Dec www.bunkerworld.com Back to home 6

Reported FixturesDEC 15'Gleamstar' 2011 75491 dwt dely aps Santos 20/25 Dec trip redelIndia intention sugar $14000 daily + $400000 bb - Raffles'Fu Tong' 1998 70850 dwt dely Machong 19 Dec trip via Indonesiaredel India $7250 daily - CaravelDEC 16'TBN' 60000/10 urea Yantai/Mundra 25/30 Dec $12.25 fio5000shinc/10000satpmshex - AmeropaDEC 17'Maia' 2009 82193 dwt dely Singapore 12/17 Dec trip viaIndonesia redel India $10900 daily - Oldendorff - <recent>'Wei Fong' 1994 70045 dwt dely Zhangzhou 17/19 Dec trip viaIndonesia redel India $6750 daily – OldendorffDEC 18'Katerina' 2004 76015 dwt dely aps Beira 30 Dec/05 Jan tripredel India intention coal $7500 daily + $250000 bb - cnrDEC 19'United Journey' 2009 82580 dwt dely aps Indonesia 25/31 Dectrip redel EC India $7750 daily + $85000 bb - Cargill'CF Diamond' 2011 75725 dwt dely Tanjung Bin 25/27 Dec trip viaIndonesia redel India intention coal $9850 daily - OldendorffContinued on Next Page.. Back to home 7

FREIGHT MATRIXSources : Central Electricity Authority, The Economic Times, Telegraph India, Financial Express, Livemint,Mining, Bunker World PricesContact our research team on ‘[email protected]’ for any inquiries on theNews article.**While all information is presented in good faith, Barry Rogliano Salles and /or SwaraajShipping cannot accept liability for any errors of fact or opinion or for any loss incurred by anyperson who may seek to rely on this information. Back to home 8